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EX-31.1 - EX-31.1 - DEL TACO INCOME PROPERTIES IV | a54352exv31w1.htm |
EX-31.2 - EX-31.2 - DEL TACO INCOME PROPERTIES IV | a54352exv31w2.htm |
EX-32.1 - EX-32.1 - DEL TACO INCOME PROPERTIES IV | a54352exv32w1.htm |
Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
(Mark One) | ||
þ
|
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended September 30, 2009 | ||
OR
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Commission file
no. 33-13437
DEL TACO INCOME PROPERTIES
IV
(A California limited partnership)
(Exact name of registrant as
specified in its charter)
California
|
33-0241855 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or
organization)
|
Identification Number) | |
25521 Commercentre Drive Lake Forest, California (Address of principal executive offices) |
92630 (Zip Code) |
(949) 462-9300
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes o No o
Indicate by check mark whether the registrant is an accelerated
filer (as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the registrants
Form S-11
Registration Statement filed December 17, 1982 are
incorporated by reference into Part IV of this report.
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM I. | FINANCIAL STATEMENTS |
DEL TACO INCOME PROPERTIES IV
CONDENSED BALANCE SHEETS
September 30, | December 31, | |||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash |
$ | 127,721 | $ | 120,448 | ||||
Receivable from Del Taco LLC |
35,902 | 37,461 | ||||||
Deposits |
704 | 608 | ||||||
Total current assets |
164,327 | 158,517 | ||||||
PROPERTY AND EQUIPMENT: |
||||||||
Land and improvements |
1,236,700 | 1,236,700 | ||||||
Buildings and improvements |
1,289,860 | 1,289,860 | ||||||
Machinery and equipment |
484,789 | 484,789 | ||||||
3,011,349 | 3,011,349 | |||||||
Lessaccumulated depreciation |
1,567,755 | 1,526,304 | ||||||
1,443,594 | 1,485,045 | |||||||
$ | 1,607,921 | $ | 1,643,562 | |||||
LIABILITIES AND PARTNERS EQUITY |
||||||||
CURRENT LIABILITIES: |
||||||||
Payable to limited partners |
$ | 15,736 | $ | 13,898 | ||||
Accounts payable |
18,982 | 10,540 | ||||||
Total current liabilities |
34,718 | 24,438 | ||||||
OBLIGATION TO GENERAL PARTNER |
137,953 | 137,953 | ||||||
PARTNERS EQUITY: |
||||||||
Limited partners; 165,375 units outstanding at September 30, 2009
and December 31, 2008 |
1,452,030 | 1,497,493 | ||||||
General partner-Del Taco LLC |
(16,780 | ) | (16,322 | ) | ||||
1,435,250 | 1,481,171 | |||||||
$ | 1,607,921 | $ | 1,643,562 | |||||
See accompanying notes to condensed financial statements.
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Table of Contents
DEL TACO INCOME PROPERTIES IV
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
RENTAL REVENUES |
$ | 109,092 | $ | 113,926 | $ | 326,680 | $ | 331,635 | ||||||||
EXPENSES: |
||||||||||||||||
General and administrative |
12,731 | 8,484 | 56,001 | 55,160 | ||||||||||||
Depreciation |
13,817 | 13,817 | 41,451 | 41,451 | ||||||||||||
26,548 | 22,301 | 97,452 | 96,611 | |||||||||||||
Operating income |
82,544 | 91,625 | 229,228 | 235,024 | ||||||||||||
OTHER INCOME: |
||||||||||||||||
Interest |
24 | 135 | 85 | 508 | ||||||||||||
Other |
125 | 75 | 325 | 1,000 | ||||||||||||
Net income |
$ | 82,693 | $ | 91,835 | $ | 229,638 | $ | 236,532 | ||||||||
Net income per limited
partnership unit (note 2) |
$ | 0.50 | $ | 0.55 | $ | 1.37 | $ | 1.42 | ||||||||
Number of units used in computing
per unit amounts |
165,375 | 165,375 | 165,375 | 165,375 | ||||||||||||
See accompanying notes to condensed financial statements.
-4-
Table of Contents
DEL TACO INCOME PROPERTIES IV
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended | ||||||||
September 30, | ||||||||
2009 | 2008 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net income |
$ | 229,638 | $ | 236,532 | ||||
Adjustments to reconcile net income to net
cash provided by operating activities: |
||||||||
Depreciation |
41,451 | 41,451 | ||||||
Changes in operating assets and liabilities: |
||||||||
Receivable from Del Taco LLC |
1,559 | (928 | ) | |||||
Deposits |
(96 | ) | (86 | ) | ||||
Payable to limited partners |
1,838 | 2,160 | ||||||
Accounts payable |
8,442 | (207 | ) | |||||
Net cash provided by operating activities |
282,832 | 278,922 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Cash distributions to partners |
(275,559 | ) | (274,473 | ) | ||||
Net increase in cash |
7,273 | 4,449 | ||||||
Beginning cash balance |
120,448 | 115,922 | ||||||
Ending cash balance |
$ | 127,721 | $ | 120,371 | ||||
See accompanying notes to condensed financial statements.
-5-
Table of Contents
DEL TACO INCOME PROPERTIES IV
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009
UNAUDITED
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial statements and should
therefore be read in conjunction with the financial statements and notes thereto contained in the
annual report on Form 10-K for the year ended December 31, 2008 for Del Taco Income Properties IV
(the Partnership or the Company). In the opinion of management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Partnerships financial position at
September 30, 2009, the results of operations for the three and nine month periods ended September
30, 2009 and 2008 and cash flows for the nine month periods ended September 30, 2009 and 2008 have
been included. Operating results for the three and nine months ended September 30, 2009 are not
necessarily indicative of the results that may be expected for the year ending December 31, 2009.
Amounts related to disclosure of December 31, 2008 balances within these condensed financial
statements were derived from the audited 2008 financial statements. Management has evaluated
subsequent events through November 16, 2009, which is the date the financial statements were
issued.
NOTE 2 NET INCOME PER LIMITED PARTNERSHIP UNIT
Net income per limited partnership unit is based on net income attributable to the limited partners
(after 1% allocation to the general partner) using the weighted average number of units outstanding
during the periods presented which amounted to 165,375 in 2009 and 2008.
Pursuant to the partnership agreement, annual partnership income or loss is allocated one percent
to Del Taco LLC, formerly known as Del Taco Inc., (Del Taco or the General Partner) and 99 percent
to the limited partners. Partnership gains from any sale or refinancing will be allocated one
percent to the General Partner and 99 percent to the limited partners until allocated gains and
profits equal losses, distributions and syndication costs, and until each class of limited partners
receive their priority return as defined in the partnership agreement. Additional gains will be
allocated 12 percent to the General Partner and 88 percent to the limited partners.
NOTE 3 LEASING ACTIVITIES
The Partnership leases certain properties for operation of restaurants to Del Taco on a triple net
basis. The leases are for terms of 32 years commencing with the completion of the restaurant
facility located on each property and require monthly rentals equal to 12 percent of the gross
sales of the restaurants. The leases terminate in the years 2023 to 2024. There is no minimum
rental under any of the leases.
-6-
Table of Contents
DEL TACO INCOME PROPERTIES IV
NOTES TO CONDENSED FINANCIAL STATEMENTS CONTINUED
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009
UNAUDITED
NOTE 3 LEASING ACTIVITIES continued
For the three months ended September 30, 2009, the two restaurants operated by Del Taco, for which
the Partnership is the lessor, had combined, unaudited sales of $583,287 and unaudited net losses
of $1,356 as compared to $616,726 and unaudited net income of $4,138 for the corresponding period
in 2008. Net income or loss of each restaurant includes charges for general and administrative
expenses incurred in connection with supervision of restaurant operations and interest expense and
the reduction in net income from the corresponding period of the prior year primarily relates to
decreased sales compared to the prior year. For the three months ended September 30, 2009, the one
restaurant operated by a Del Taco franchisee, for which the Partnership is the lessor, had
unaudited sales of $325,817 as compared with $332,656 during the same period in 2008.
For the nine months ended September 30, 2009, the two restaurants operated by Del Taco, for which
the Partnership is the lessor, had combined, unaudited sales of $1,772,395 and unaudited net income
of $18,773 as compared to $1,797,651 and unaudited net income of $4,376 for the corresponding
period in 2008. Net income or loss of each restaurant includes charges for general and
administrative expenses incurred in connection with supervision of restaurant operations and
interest expense and the increase in net income from the corresponding period of the prior year
primarily relates to reduced operating expenses, partially offset by reduced sales compared to the
prior year. For the nine months ended September 30, 2009, the one restaurant operated by a Del
Taco franchisee, for which the Partnership is the lessor, had unaudited sales of $949,936 as
compared with $965,974 during the same period in 2008.
NOTE 4 TRANSACTIONS WITH DEL TACO
The receivable from Del Taco consists primarily of rent accrued for the month of September 2009.
The September rent was collected in October 2009.
Del Taco serves in the capacity of general partner in other partnerships which are engaged in the
business of operating restaurants, and three other partnerships which were formed for the purpose
of acquiring real property in California for construction of Mexican-American restaurants for lease
under long-term agreements to Del Taco for operation under the Del Taco trade name.
In addition, see Note 5 with respect to certain distributions to the General Partner.
NOTE 5 DISTRIBUTIONS
Total cash distributions declared and paid in January, April and July 2009 were $101,551, $90,259
and $83,749, respectively. On October 27, 2009, a distribution to the limited partners of
$105,915, or approximately $0.64 per limited partnership unit, was declared. Such distribution was
paid October 30, 2009. The General Partner also received a distribution of $1,070 with respect to
its 1% partnership interest in October 2009.
-7-
Table of Contents
DEL TACO INCOME PROPERTIES IV
NOTES TO CONDENSED FINANCIAL STATEMENTS CONTINUED
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009
UNAUDITED
NOTE 6 PAYABLE TO LIMITED PARTNERS
Payable to limited partners represents a reclassification from cash for distribution checks made to
limited partners that have remained outstanding for six months or longer.
NOTE 7 CONCENTRATION OF RISK
The three restaurants leased to Del Taco make up all of the income producing assets of the
Partnership and contributed all of the Partnerships rental revenues during the three and nine
months ended September 30, 2009 and 2008. Therefore, the business of the Partnership is entirely
dependent on the success of the Del Taco trade name restaurants that lease the properties.
The Partnership maintains substantially all of its cash and cash equivalents at one major
commercial bank. The Federal Depository Insurance Commissions limit was $250,000 at September 30,
2009 and December 31, 2008. At September 30, 2009 and December 31, 2008, the Partnership had
approximately $130,000 and $127,000, respectively, on deposit at one financial institution.
-8-
Table of Contents
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Liquidity and Capital Resources
Del Taco Income Properties IV (the Partnership or the Company) offered limited partnership units
for sale between June 1987 and June 1988. $4.135 million was raised through the sale of limited
partnership units and used to acquire sites and build three restaurants and also to pay commissions
to brokers and to reimburse Del Taco LLC (Del Taco or the General Partner) for offering costs
incurred. In February of 1992, approximately $442,000 raised during the offering but not required
to acquire sites and build restaurants was distributed to the limited partners.
The three restaurants leased to Del Taco make up all of the income producing assets of the
Partnership. Therefore, the business of the Partnership is entirely dependent on the success of
the Del Taco trade name restaurants that lease the properties. The success of the restaurants is
dependent on a large variety of factors, including, but not limited to, competition, consumer
demand and preference for fast food, in general, and for Mexican-American food in particular.
Results of Operations
The Partnership owns three properties that are under long-term lease to Del Taco for restaurant
operations (Del Taco, in turn, has sub-leased one of the restaurants to a Del Taco franchisee).
The following table sets forth rental revenue earned by restaurant for the three and nine months
ended September 30, 2009 and 2008 (unaudited):
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Orangethorpe Ave., Placentia, CA |
$ | 48,894 | $ | 48,708 | $ | 141,183 | $ | 142,825 | ||||||||
Lakeshore Drive, Lake Elsinore, CA |
39,098 | 39,919 | 113,992 | 115,917 | ||||||||||||
Highland Ave., San Bernardino, CA |
21,100 | 25,299 | 71,505 | 72,893 | ||||||||||||
Total |
$ | 109,092 | $ | 113,926 | $ | 326,680 | $ | 331,635 | ||||||||
The Partnership receives rental revenues equal to 12 percent of gross sales from the
restaurants. The Partnership earned rental revenue of $109,092 during the three month period ended
September 30, 2009, which represents a decrease of $4,834 from the corresponding period in 2008.
The Partnership earned rental revenue of $326,680 during the nine month period ended September 30,
2009, which represents a decrease of $4,955 from the corresponding period in 2008. The changes in
rental revenues between 2008 and 2009 are directly attributable to decreases in sales levels at the
restaurants under lease due to local competitive and industry factors.
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Table of Contents
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations continued |
The following table breaks down general and administrative expenses by type of expense:
Percent of Total | ||||||||||||||||
General & Administrative Expense | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Accounting fees |
40.61 | % | 64.91 | % | 72.01 | % | 78.16 | % | ||||||||
Distribution of information
to limited partners |
59.39 | % | 35.09 | % | 27.99 | % | 21.84 | % | ||||||||
100.00 | % | 100.00 | % | 100.00 | % | 100.00 | % | |||||||||
General and administrative costs for the three month period ended September 30, 2009 increased from
the corresponding period in 2008 primarily due to increased printing costs and bank charges,
partially offset by reduced accounting costs. General and administrative costs for the nine month
period ended September 30, 2009 increased from the corresponding period in 2008 primarily due to
increased bank charges, partially offset by reduced accounting and tax preparation costs.
For the three month period ended September 30, 2009, net income decreased by $9,142 from 2008 to
2009 due to the decrease in revenues of $4,834, the decrease in interest and other income of $61
and the increase in general and administrative expenses of $4,247. For the nine month period ended
September 30, 2009, net income decreased by $6,894 from 2008 to 2009 due to a decrease in revenues
of $4,955, the decrease in interest and other income of $1,098 and the increase in general and
administrative expenses of $841.
Recent Accounting Pronouncements
None
Off-Balance Sheet Arrangements
None
-10-
Table of Contents
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations continued |
Critical Accounting Policies and Estimates
Managements discussion and analysis of financial condition and results of operations, as well as
disclosures included elsewhere in this report on Form 10-Q are based upon the Partnerships
financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial statements requires
management to make estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. The Partnership believes the critical accounting policies that most impact
the financial statements are described below. A summary of the significant accounting policies of
the Partnership can be found in Note 1 to the Financial Statements which is included in the
Partnerships December 31, 2008 Form 10-K.
Revenue Recognition: Rental revenue is recognized based on 12 percent of gross sales of
the restaurants for the corresponding period, and is earned at the point of sale.
Property and Equipment: Property and equipment is stated at cost. Depreciation is
computed using the straight-line method over estimated useful lives which are 20 years for land
improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.
The partnership accounts for property and equipment in accordance with authoritative guidance
issued by the Financial Accounting Standards Board that requires long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the carrying value of the
asset may not be recoverable. In evaluating long-lived assets held for use, an impairment loss is
recognized if the sum of the expected future cash flows (undiscounted and without interest charges)
is less than the carrying value of the asset. Once a determination has been made that an
impairment loss should be recognized for long-lived assets, various assumptions and estimates are
used to determine fair value including, among others, estimated costs of construction and
development, recent sales of comparable properties and the opinions of fair value prepared by
independent real estate appraisers. Long-lived assets to be disposed of are reported at the lower
of carrying amount or fair value less cost to sell.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
None.
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Table of Contents
Item 4T. | Controls and Procedures |
(a) | Evaluation of disclosure controls and procedures: |
As of the end of the period covered by this quarterly report, we carried out an
evaluation, under the supervision and with the participation of the Companys management,
including the Companys Chief Executive Officer and Treasurer, of the effectiveness of
the design and operation of the Companys disclosure controls and procedures. Based upon
that evaluation, the Chief Executive Officer and Treasurer concluded that the Companys
disclosure controls and procedures are effective in timely alerting them to material
information relating to the Company required to be included in the Companys periodic
Securities and Exchange Commission filings.
(b) | Changes in internal controls: |
There were no significant changes in the Companys internal controls over financial
reporting that occurred during our most recent fiscal quarter that materially affected,
or is reasonably likely to materially affect, our internal control over financial
reporting.
(c) | Asset-backed issuers: |
Not applicable.
-12-
Table of Contents
PART II. OTHER INFORMATION
There is no information required to be reported for any items under Part II, except as follows:
Item 6. | Exhibits |
(a) | Exhibits |
31.1
|
Paul J. B. Murphy, IIIs Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2
|
Steven L. Brakes Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1
|
Certification pursuant to Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
-13-
Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DEL TACO INCOME PROPERTIES IV (a California limited partnership) Registrant |
||||
Del Taco LLC General Partner |
||||
Date: November 16, 2009
|
/s/ Steven L. Brake
|
|||
Treasurer |
-14-
Table of Contents
EXHIBIT INDEX
Exhibit No. | Description | |
31.1
|
Paul J. B. Murphy, IIIs Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2
|
Steven L. Brakes Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1
|
Certification pursuant to Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
-15-